THE IMPACT OF CAPITAL STRUCTURE ON FIRMS PERFORMANCE IN NIGERIA: DOES INDUSTRY HETEROGENEOUS FACTORS COUNT?

This study was conducted to examine the impact of Capital structure on firms’ value within the influence of heterogeneous factors such as firm- specific, industry-specific and country-specific factors. The study employed a sample of eighteen (18) firms from nine (9) sectors of the Nigerian economy. The study covered a period of ten (10) years (2012- 2022) and adopted panel data analysis while using random and fixed effect models in estimation. The dependent variable for this study is Tobin’s Q which serves as a proxy for firms’ value while the independent variables are long term debt, equity capital, interest expense, firm size and firm Age. The study found out that a firm’s market value is positively and significantly influenced by its choice of capital structure; capital structure also changes given industry heterogeneity. This study concludes that since we have many theories on capital structure, firms should have financial policy on the type of capital structure they intend to adopt based on the prevailing circumstances. The study therefore, recommended that firms should ensure that the proportion of leverage to equity do not grow to unsustainable levels to avoid the result of diminishing effect on firm value.